Gresham war heats up as both sides try to woo shareholders

The dispute between the board of the Gresham hotel group and the company's main shareholder heated up yesterday, with both sides making strong pitches to shareholders.

A document from Red Sea, the Israeli property and hotel company that owns 28 per cent of Gresham, urged shareholders to vote for its resolutions at the forthcoming extraordinary general meeting. "Vote for shareholder value", it urged in its document.

Gresham, in its document, strongly urged shareholders to vote against the Red Sea resolutions and warned that if, over the longer term, Red Sea won control of the board while still a minority shareholder, the company might be delisted from the Dublin and London exchanges.

Red Sea is seeking the removal of four existing directors from the Gresham board and their replacement by three of its nominated appointees. This would create a 50-50 split on a proposed six-person board.

In its document, Red Sea said that if its resolutions were carried, it would seek co-operation with the rest of the directors who would remain on the board with a view to appointing, by mutual agreement, a seventh director as soon as possible after the new board is formed.

The meeting, due to be held on August 8th in Dublin, was called by Red Sea after the collapse of negotiations between the two sides aimed at finding agreement on the make-up of the board. Gresham had suggested Red Sea be given two places on the board. Red Sea had been seeking three appointments to a six-person board, with one of the Red Sea appointees being appointed chairman.

In a letter to shareholders Mr Donal Chambers, non-executive director, said the resolutions proposed by Red Sea would lead to an "inevitable impasse". He said the board strongly urged shareholders to vote no.

Mr Chambers also said Red Sea, which is listed on the Tel Aviv exchange, is principally a property company. Its share price is 43.5 per cent below what it was in January 2000, he said. It has not paid a dividend to shareholders for at least the past five years.

Red Sea, in its document, said it was not seeking control of Gresham but a board structure that would create shareholder value.

"The board of Gresham seems more interested in protecting its jobs and perks rather than listening to shareholders' concerns.

"We believe that the current board of directors of Gresham Hotel Group plc is incapable or unwilling to create shareholder value."